How to Measure Quality of Hire for Competitive Advantage
Ally Financial, a bank-holding company in Detroit, hires 2,300 people annually. Of those, about 1,000—many of whom are in entry-level positions—are considered high risk for turnover, says Kathie Patterson, the company’s CHRO. Several years ago, HR implemented a new assessment tool and process to measure quality of hire during the hiring process. Since then, Patterson says, involuntary turnover has dropped by roughly 25 percent.
“Your talent base defines your competitive advantage,” she says, adding that Ally supports almost 8,000 employees. “It helps shape your culture, and the amount of money that’s lost by not paying close attention to [talent] seems a little negligent.”
Still, many companies don’t measure quality of hire, despite double- or even triple-digit attrition rates. Some perceive it as burdensome or don’t know where to start. However, others have ranked it among their top priorities.
While there’s no universal approach, many measure candidate quality with pre-assessment tools and then evaluate retention metrics, engagement scores, performance reviews and even co-worker surveys to determine if new hires are a good fit regarding culture and performance. HR professionals say the process helps them hire right, decrease turnover and upgrade their talent.
Building High-quality Data
Applicants pursuing entry-level jobs in collections, customer service and sales at Ally must complete a 40-minute online personality test as part of the application process that predicts their job success, Patterson says.
The next step involves a prescreen interview where recruiters or HR business partners assess the candidate’s motivation and abilities and provide a realistic snapshot of the role, including the “good, bad and ugly,” Patterson says.
“As soon as we did this realistic job preview, we quickly increased our retention rate,” she says. “It was night and day. And we’d hear from our leaders that they were getting higher-quality candidates.”
Between 90 and 120 days after candidates are hired, HR sends their supervisors a short survey, asking if the candidates met their expectations or if they’d select them again. New hires are also surveyed, mainly about their selection and onboarding experience.
HR evaluates the data in aggregate, with retention rates, engagement scores and performance evaluations, searching for trends. When misfits occur, she says, HR business partners work with supervisors to diagnose what went wrong and identify “course corrections.”
Over a five-year span, Ally’s HR unit will dive for more data by evaluating employee-performance reviews and talent-potential ratings by supervisors that assess an employee’s abilities, competencies and personality traits, says Patterson.
“We’ll get smarter with time as we work with our managers and understand what success looks like within each role,” she says. “The collections area is one that we’re wiser in. We’re trying to figure out the right [employee] profile: Is it somebody looking for part-time work or a stay-at-home mom who wants hours between 9 [a.m.] and 3 [p.m.]?”
Measuring Employee-retention Rates
Publicis Health, a consulting firm in New York that employs 5,000 people and helps organizations better manage their health and wellness communications, has spent the last year harmonizing its data strategy and human resource information systems, says Shannon Boyle, the firm’s global chief talent officer and executive vice president of HR.
“We’re a collection of agencies that haven’t always historically been on the same platforms,” she says, adding that HR is aiming for a 20-percent attrition rate, in an industry that sees an average attrition of 25 percent. “We aspire to have one common data strategy that allows us to track the entire process of hire and measure against performance, promotion and retention rates.”
The company designed a model for global performance management and another for employee potential, she says, explaining that the latter comprises defined indicators for high performers. The company has one common language and measurement process that’s deployed at the local level in each country.
Although calibrated talent or performance reviews are HR’s most substantive source of data, she says, employee-retention rates, promotions and the impact of training on employee performance are also considered.
“We have done [measurements] by capability, adjusted them by brand and also have done them by client to really understand the predictive pieces that make you successful with a particular client,” Boyle says, adding that she is currently experimenting with psychometric tools. “We’re capturing and learning from the things that emerge as more predictive within those categories.”
The firm also built a global community of talent-acquisition professionals, who are locally based and actively managed by HR’s head of people development, to ensure that everyone uses standard assessment processes, tools and practices.
But the approach extends beyond new hires. HR identifies those on the verge of a promotion and encourages them to participate in Emerging Managers, a program that pairs would-be managers with a summer intern. A three-member HR team observes their management skills, assessing their performance. Even the company’s leaders engage in face-to-face personality assessments, which provide HR with a success profile to measure against for future hires.
“We’re not just starting at the beginning and building the data strategy and systems,” says Boyle, adding that HR is concurrently building measurements on both ends of the talent-management spectrum. “Find receptive places [to measure] instead of trying to push a rock uphill. Go where the demand is and build from there, then everybody will want it.”
Last year, Chicago-based Combined Insurance, which offers supplemental, health and life insurance, launched a measuring process that complements hard metrics about the estimated 100 corporate staff it hires each year.
Melanie Lundberg, assistant vice president of talent management and corporate communications at the company, which supports 3,500 employees nationwide, sends a survey to an employee’s hiring manager at the end of his or her first 60 days.
“It gives me great feedback not only on the new hire but potential breakdowns in the process,” Lundberg says.
The survey looks at performance, culture fit, how the new hire’s skills compare to his or her predecessor and then solicits suggestions for improving the recruiting and onboarding process. Hiring managers rate whether new hires fall below, meet or exceed expectations. For those with low ratings, Lundberg discusses the selection process with the recruiter to see what might have been missed. Lundberg recently started having new hires rate the recruiting, onboarding and orientation processes and, in the long term, hopes to develop a holistic perspective on the new-hire experience by comparing responses among hiring managers and new hires over a three-year period.
Lundberg reviews the raw data, shares it with the executive team and then seeks solutions. She points to two new hires in the past two years who quit within several months because of their long commute. While such issues were briefly addressed in interviews, she says, recruiters now repeatedly discuss them to improve decision-making.
Hiring the “Right Quality of People”
While there are many ways to measure quality of hire, the process starts with understanding predictors of performance and selecting the right metrics to measure, says Ranjan Dutta, partner and people analytics practice leader at Aon in Washington.
“There are certain job families that are more important to the organization . . . [because] they have a disproportionate impact on revenue or profitability,” he says, adding that HR should first develop metrics for these positions and then compare their data to industry benchmarks.
But never assume. Instead, collaborate with supervisors about their workforce needs and identify which metrics to capture.
Likewise, measure flexibility, creativity and other soft skills involved in decision-making, he says. Consider analyzing your candidate pipeline using pre-hire assessment tools and compare them against profiles of successful employees.
Among the most common HR mistakes is simply not tracking data, Dutta says, either due to lack of knowledge or work overload. But if you don’t have “the right quality of people coming in,” he says, “you may not exist in the market.”
Some companies also survey co-workers of new hires.
Timing is important. The “sweet spot” for surveying all parties is between 90 and 120 days because it’s enough time for new hires to get their feet wet but still early enough to intervene and accelerate the person’s performance, says Brian Kropp, HR practice leader at Gartner, a global research and advisory firm based in Stamford, Conn.